Newmark Posts Strong Quarterly Earnings, Eyes $3B in Annual Revenue in 2025
Growing leasing, servicing and origination volumes buttressed the brokerage’s performance, though revenue was down for the year
By Brian Pascus February 22, 2024 2:07 pm
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Newmark (NMRK)’s strong run continued through the end of 2023.
Bolstered by big-name acquisitions and the $50 billion Signature Bank portfolio loan sale, the 95-year-old brokerage reported strong financials during its fourth-quarter 2023 earnings call Thursday, posting $747.4 million in quarterly revenue, an increase of 23 percent over Q3, and improved quarterly revenue growth across its leasing and management services business lines.
“We also closed the largest industrial occupier lease, the largest office tenant lease, and the largest office building sale in the U.S.,” said Newmark CEO Barry Gosin on the earnings call. “Newmark is successfully executing on its strategy of being the best in each of its service lines.”
No deal has been bigger from the brokerage than the sale of more than $50 billion of loans originated by Signature Bank, which failed in March 2023. The Federal Deposit Insurance Corporation tapped Newmark’s Adam Spies, Doug Harmon, and John Howley to quarterback the process, which saw Related Companies emerge as the big winner.
Gosin noted the Signature deal was the largest real estate loan sale in U.S. history.
Spies and Harmon joined Newmark from Cushman & Wakefield in a blockbuster move in February 2023; the firm added capital markets veteran Bill Fishel from JLL (JLL) in July; and, this month, the firm secured a leading affordable housing brokerage team of Andrew Daitch, Steven Miscavish, Seth Barnett and Matthew Kurzmann, formerly of Affordable Housing Advisors.
“If you’re great, you should be at Newmark,” Gosin said on the call.
The firm’s fees from servicing grew 19.4 percent quarter-over-quarter, and leasing revenues grew 19.6 percent, largely driven by strong office and industrial property deals, according to Newmark Chief Financial Officer Michael Rispoli.
Moreover, the brokerage’s investment sales grew by 20.7 percent in the fourth quarter while origination revenues grew by 45.9 percent. This was at a time when industry-wide investment sales activity declined by 40 percent in the U.S. and Europe, and U.S. commercial and multifamily originations decreased by 25 percent, according to Rispoli.
All told, Newmark’s total revenues in 2023 reached $2.47 billion, a decline of nearly 9 percent from 2022. The firm’s adjusted EBITDA (earnings before interest, taxes, deductions and amortization) — a proxy for cash flow — were $166.2 million in the fourth quarter and $398.3 million on the year. That is compared to $96 million in the third quarter of 2022 and $510.7 million in 2022.
Gosin said that Newmark is poised to capitalize on the large volume of commercial and multifamily mortgage loans that are expected to mature in 2024 — the Mortgage Bankers Association estimates the volume to reach $929 billion. He noted that Newmark estimates one-third of that volume is underwater loans that need to be sold, one-third are loans that need to be restructured, and one-third are loans that will need advisers to help them find new lenders.
“These maturities represent an enormous opportunity for us,” said Gosin. “We expect existing owners and lenders who receive property in foreclosure will turn to Newmark for … finding new sources of capital — including equity recapitalizations and joint ventures — selling loans, property management, advisory, asset management servicing, and leasing.”
The firm expects transaction volumes in these realms to accelerate in the second half of 2024.
“Once volumes fully normalize in the middle of 2025, and given our substantial investment, we expect our business to generate over $3 billion in revenue and over $630 million in adjusted EBITDA [annually],” said Rispoli.
Brian Pascus can be reached bpascus@commercialobserver.com
